POVERTY AT THE CROSSROADS. John Stapleton Open Policy Policy Class 2015

Transcription

1 POVERTY AT THE CROSSROADS John Stapleton Open Policy Policy Class 2015

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3 Poverty at the Crossroads 3 Quotes to set the stage ( and the frame) The Third Rail: Leech & McNish The Golden Fish p.135 about racing to the bottom wanting everyone to do as badly as me.. I Spend Therefore I Am: Philip Roscoe The car vs. the bus p.5 why the car is cheaper than the bus

4 Poverty at the Crossroads 4 The Lessons Don t build others up! bring everyone else down even though it costs me more. The example DBPP vs DCPP. Disperse risk rather than share it so we all lose! Treat everything as externalities for the well-off but disallow any externalities for the poor: The rich become our least expensive citizens The poor become our most expensive

5 Poverty at the Crossroads 5 Topics The Big Picture in income security Social Assistance in Ontario Social Assistance and Minimum Wages in Ontario The Modern Labour Force Disability Food Retirement on a low income

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7 Poverty at the Crossroads 7 THE BIG PICTURE Topic One

8 Poverty at the Crossroads 8 CANADA: Estimated Income Transfers by Program 2013 ($153 Billion) LOCAL 3% SOCIAL ASSISTANCE 10% WORKERS COMPENSATION 3% GST CREDIT 3% VETERANS (WW I, WW II, VETS ALLOW) 2% CCTB 7% OAS 28% UCCB 2% CPP/QPP 31% EI & QUEBEC PARENTAL INSURANCE 11%

9 Poverty at the Crossroads 9 CANADA: Estimated Income Transfers by Target Group 2013 ($153 Billion) Other (local, residual CPP/QPP) 7% GST Credit 3% SA includes benefits paid to persons with Social Assistance 10% EI & Quebec Parental Insurance 11% DISABLED (WComp, C/QPP-D, Vets) 8% CHILDREN (CCTB, UCCB, Q/CPP Children, CSA) 9% SENIORS (OAS, C/QPP Retirement, WWI & WWII 52%

10 GST Credit 3% Other (local, residual CPP/QPP) 7% Poverty at the Crossroads 10 CANADA: Estimated Income Transfers by Target Group 2010 ($142.4 Billion) SA includes benefits paid to disabled Social Assistance 10% EI & Quebec Parental Insurance 14% Seniors (OAS, C/QPP Retirement, WWI & WWII)) 49% Disabled (WComp, C/QPP-D) 7% Children (CCTB, UCCB, Q/CPP Children, CSA) 10% Estimates based on Statistics Canada's "Gov't Transfer

11 Poverty at the Crossroads 11 CANADA: Estimated Income Transfers by Program 2010 ($142.4 Billion) GST CREDIT 3% LOCAL 3% VETERANS (WWI, WWII, VETS ALLOW) 2% CCTB 7% UCCB 2% CSA <1% WORKERS COMPENSATION 4% SOCIAL ASSISTANCE 10% OAS 26% CPP/QPP 29% EI & QUEBEC PARENTAL INSURANCE 14% Estimates based on Statistics Canada's "Gov't Transfer Payments to Persons".

12 Tax Credits 4% Workers Compensation 4% Ontario Estimated Spending by Program 2013 ($60 B) Provincial Child Benefits 2% GAINS-A < 1% Veterans benefits 1% Social Assistance 11% OAS/GIS/Allowance 26% EI Benefits 9% GST Credit 3% UCCB 2% CCTB 7% CPP 31% Worker's Compensation includes spending on health and vocational

13 Ontario: Estimated Program Spending by Source of Funds ($60 B) Provincial Employer contributions (WComp) 4% Municipal taxes < 1% Provincial taxes 17% Federal government taxes 39% Federal payroll taxes (EI & CPP) 40%

14 Municipal 1% Poverty at the Crossroads 14 ONTARIO: ESTIMATED INCOME SECURITY SPENDING BY LEVEL OF GOVERNMENT 2013 Provincial 20% Federal 79% August 2012 ODSP revised. Total revised.

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16 Poverty at the Crossroads 16 CANADA IN CONTEXT OECD data

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18 Poverty at the Crossroads 18 Look where Canada stands- singles

19 Poverty at the Crossroads 19 Much better for lone parents

20 Poverty at the Crossroads 20 SOCIAL ASSISTANCE IN ONTARIO Topic Two

21 10 Poverty at the Crossroads 21 ONTARIO Unemployment Rates and Percentage of Population on SA, OW and ODSP June 2007 to September P E R C E N T A G E Unemployment Rate % of Population on SA % of Population on OW % of Population on ODSP

22 7.0 Poverty at the Crossroads 22 ONTARIO Percentage of Population on Assistance and by Program (OW and ODSP) June 2007 to September P E R C E N T A G E % of Population on SA % of Population on OW % of Population on ODSP

23 Poverty at the Crossroads 23 ONTARIO Unemployment Rates and Percentage of Population on SA 1981 to P E R C E N T A G E Unemployment Rate % of Population on SA

24 Poverty at the Crossroads 24 ONTARIO Unemployment Rates and Percentage of Population on SA 1981 to 2008, Monthly from January P E R C E N T A G E Unemployment Rate % of Population on SA

25 18 Poverty at the Crossroads 25 Change in % of Population on Social Assistance in Ontario: Before Major Downturns to Peak Caseloads in the Great Depression and Three Major Recessions March 1994 Oct Nov. 2011

26 Social Assistance Rates Poverty at the Crossroads 26

27 Poverty at the Crossroads 27 Duration of Unemployment

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29 Poverty at the Crossroads 29 MINIMUM WAGES AND SOCIAL ASSISTANCE Topic Three

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33 $25,000 Poverty at the Crossroads 33 ONTARIO: SINGLE EMPLOYABLE PERSON Annual Income from Social Assistance versus Full-Time Employment at Minimum Wage 1967 to 2014 $20,000 $15,000 $10,000 $5,000 $0 Annual SA Gross Annual Income at Minimum Wage (37.5 hour week)

34 % Poverty at the Crossroads 34 ONTARIO Annual Social Assistance Income as Percentage of Annual Income from Minimum Wage Employment Single Employable Person 1967 to % 60% 50% 40% 30% 20% SA as % of Minimum Wage (37.5 hour week)

35 Poverty at the Crossroads 35 THE MODERN LABOUR FORCE Topic Four

36 THE LABOUR MARKET DIFFERENT WORK CATEGORIES 36 Change in Share of Employment, Canada (Richard Florida) Poverty at the Crossroads 36

37 Poverty at the Crossroads 37 Labour Market in Toronto over past 25 years Knowledge Workers Middle Service Service Entry Middle Working Working Entry 0

38 Poverty at the Crossroads 38 DISABILITY Part 5

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40 40 Nine Disability income systems in Canada Social (income) assistance is one of nine disability income systems: CPP-D EI Sickness Veterans Private Plans WSIB RDSP Disability Tax Credits Social (income) assistance WITB-D Poverty at the Crossroads

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45 Key Features of the Nine systems Social (income) assistance one of nine disability income systems Disability Income System Nine Disability Income Systems in Ontario and Canada Requires Employment for Eligibility? Permanent Monthly Benefits provided to age 65? CPP Yes Yes EI Sickness Yes 15 weeks Veterans Yes (military) Yes until recently WSIB Yes Yes until recently Private Workplace Plans Yes Yes until recently Working Income Tax Benefit Yes Yes if low wage work continues RDSP No No Social (income) assistance No Yes DTC No Reduces taxes only Poverty at the Crossroads 45

46 46 The Story of social (income) assistance Growth But there are at least 14 answers for an increasing social assistance share among disability income systems. In brief, they are: Workforce changes whereby persons with disabilities and others do not have tenured salary and wage jobs that would trigger disability benefits Reductions in some of the other 8 disability income systems leaving social assistance with more to do Embedded rules that do not support work in older disability income systems (like CPPD) Changes in medical treatment and especially advances in medicine and trauma treatment Aging of the population Inclusion of mood disorders and neuroses as disabilities Poverty at the Crossroads

47 47 The Story of social (income) assistance Growth the supposed existence of a disability culture where people choose disability benefits over employment existence of separate social assistance disability programs and large differences in benefit levels between them and general social assistance reductions in OAS and GIS for immigrant seniors post-economic crash unemployment among persons with disabilities and continuing economic stagnation lack of knowledge about disability income systems other than social assistance post-recession differences in employment patterns and benefits differing financial incentives among programs to bring people with disabilities back to work Barriers to work in general Poverty at the Crossroads

48 48 The Story of social (income) assistance Growth In addition, there appear to be six major reasons for the differences among provinces: Huge differences in EI coverage that reduces number of persons going on social assistance in eastern provinces. As regular social assistance is often a precursor to application for disability benefits, more robust regular EI appears to reduce social assistance overall. Social assistance disability programs that are smaller, less generous, and not separate in eastern provinces Smaller Social Assistance based Disability components for First Nations in Eastern Provinces A greater portion of persons with disabilities in the mainstream (wage and salary) work forces in eastern provinces A greater presence of interventions by other disability systems in eastern provinces; and Fewer persons with disabilities that are ineligible for (or eligible for reduced benefits for) Old Age Security at age 65 in eastern provinces. Poverty at the Crossroads

49 Poverty at the Crossroads 49 FOOD, COMMODITIES AND SOCIAL ASSISTANCE RATES Part 6

50 Poverty at the Crossroads 50 Food Consumption patterns and income The Poor eat calories The middle class eats nutrition The rich eat presentation

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52 PERCENT CHANGE Poverty at the Crossroads 52 PERCENT CHANGE IN COST OF WELFARE DIET, BY COMPONENT COMPARED TO INFLATION ONTARIO 1995 TO AUGUST Vegetables & Fruits Meat & Alternatives Dairy 80 Grains Inflation 20 0

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56 Poverty at the Crossroads 56 What does commodity price inflation mean for food? Food inflation has already outstripped general price inflation over the years This trend likely to accelerate in future High calorie foods accelerating the most available to the poor Low calorie food accelerating the least less available to poor Food deserts New concern about affordability of food in 3 rd World

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59 Poverty at the Crossroads 59 RETIREMENT ON A LOW INCOME Part 7

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61 61 What do you mean by low income? What will your family picture be when you are age 65? Will you get GIS? Your family picture when you are age 65: As of October 2015, you are low income if your income is under:* Single person $17,280 Couple, both getting Old Age Security (OAS pension) $22,848 Couple, only one partner getting OAS, other partner is under 60 $41,424 Couple, one partner getting OAS pension, other partner is and getting the Allowance Poverty at the Crossroads $31,968

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63 Poverty at the Crossroads 63 Top 10 Countdown: Rogues Gallery of Bad Advice to Low Income people planning retirement 10. The government will send you application forms for benefits 9. Working after age 65 is a good way to bring in extra money 8. Don t buy an RRSP after age Don t buy a TFSA until your RRSP room is used up 6. Don t take Early CPP 5. Take early CPP 4. Don t bother applying for OAS if you re a sponsored immigrant 3. Wait until you have 10 years in Canada to apply for OAS 2. Don t bother planning for retirement if you have very little $$$ 1. Buy an RRSP (before age 65).

64 Poverty at the Crossroads 64 Why is mainstream financial advice wrong for low income retirees? Three fundamental assumptions about retirement planning and financial advice do not apply to low income retirees. That our post-retirement income will be less than our preretirement income; and That our taxable income will be lower at 65. That tax credits will help us realize higher income For low income retirees, the opposite is true

65 Poverty at the Crossroads 65 Why is mainstream financial advice wrong for low income retirees? Most of us are told to buy RRSPs and wait to collect our CPP retirement benefits. The standard advice is to pay into an RRSP before registering for a TFSA...And almost no one advises registering for an RRSP after age 65.

66 Poverty at the Crossroads 66 Why is mainstream financial advice wrong for low income retirees? Many low income seniors receive higher incomes when they turn 65. Old Age Security, combined with CPP and the Guaranteed Income Supplement is often significantly higher than the social assistance, disability benefits, and the low earnings they realize in the years leading up to age 65. And Old Age Security and CPP are taxable while social assistance and some disability benefits are not. This situation results in higher taxation once they reach 65, not lower.

67 Poverty at the Crossroads 67 Why is mainstream financial advice wrong for low income retirees? It s almost as if potential low income retirees live in a different world where their situation is the polar opposite to what is faced by most retirees. This means low income retirees need very different advice than they get from the mainstream. But is this advice available? The answer is largely no. One Reason: GIS is an entitlement, not a tax credit!

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69 Poverty at the Crossroads 69 QUESTIONS Thank You